SugarHouse Casino expansion plan stirs lawsuit by local investors

If SugarHouse Casino breaks ground on a planned expansion this November, what will the next phase of the gaming hall look like?

That question is at the heart of a dispute between local minority investors and the Chicago billionaire developer who runs the casino, Neil Bluhm.

In a lawsuit filed Friday in Delaware Chancery Court, local investors argue that they are being marginalized in decision-making for the casino's future. Their partnership is led by Philadelphia lawyer Richard A. Sprague and auto magnate Robert Potamkin.

The lawsuit claims that Bluhm wants to refinance the casino project, a move that would limit additional borrowing to $95 million and force a scaling back of a proposed expansion. The investors said the revised Bluhm plan would cost less than 85 percent of the expansion approved in 2009 by gaming regulators.

The suit alleges the expansion would be "much smaller and less expensive to construct." Among the changes would be adding a parking garage that would be smaller than a proposed 10-story structure.

If the plan moves ahead, SugarHouse would have to petition the gaming board for new approval, as well as the city's Planning Commission.

Doug Harbach, a spokesman for the gaming board, declined to comment on the dispute. He said the SugarHouse group has not filed any petitions with the board regarding its development plans.

Sprague did not return calls for comment.

Greg Carlin, the CEO of SugarHouse, declined to comment on the pending litigation. In a statement, he called the expansion plans "conceptual" and noted that the state agency and the city would have to approve.

"We are 100 percent committed to delivering a superior gaming experience for Philadelphia," Carlin said.

The local investors, who own about a third of SugarHouse through a partnership called RPRS Gaming, also include construction manager Daniel J. Keating 3d, former state Supreme Court Justice William Lamb, entrepreneur Jerry Johnson, and developer Peter DePaul. They teamed with Bluhm and his associates in 2006 to bid on one of the city's two casino licenses. Bluhm, his family, and associates have invested through two partnerships: High Penn Gaming and HP Gaming Partners.

The casino is managed by a four-man committee: Sprague and Potamkin of RPRS Gaming, and Bluhm and Carlin of High Penn. While Sprague and Potamkin each get one vote on the committee, Bluhm and Carlin control two votes apiece.